Bilateral Trade Agreements and the Feasibility of Multilateral Free Trade

Kamal Saggi () and Halis Yildiz

Chapter 8 in Economic Analysis of the Rules and Regulations of the World Trade Organization, 2018, pp 168-185 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We studied how the pursuit of bilateral free-trade agreements (FTAs) affects the likelihood of achieving multilateral free trade. We derive and compare the stable Nash equilibria of two games of trade liberalization: in the FTA game, each country can either form an FTA with one of its trading partners or both of them or none of them, whereas in the (restricted) No FTA game, purely bilateral FTAs are not permitted. The major result is that there exist circumstances under which the freedom to pursue (discriminatory) bilateral FTAs is necessary for achieving multilateral free trade.

Keywords: Multilateral Trading System; Trade Agreements; Trade Liberalization; International Tariff Cooperation; WTO Disputes; Case Studies (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2018
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Related works:
Journal Article: Bilateral Trade Agreements and the Feasibility of Multilateral Free Trade (2011)
Working Paper: Bilateral trade agreements and the feasibility of multilateral free trade (2009)
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